Florida water utilities and cooperatives are wrangling with new challenges from cuts to state revolving funds, a worsening drought and increasing construction costs.
These challenges come on top of the continuing challenges of responding to population growth and, for those utilities that also handle wastewater, a Florida law drastically curbing ocean discharges and federal regulations
Tampa-based Holland & Knight Partner Michael Weiner said a change in federal appropriations for state revolving funds has led Florida to tell utilities there will soon be less of these funds available.
The federal Infrastructure Investment and Jobs Act has provided $43 billion for Clean Water and Drinking Water State Revolving Funds nationwide over the last several years. It ends with the new federal fiscal year starting Oct. 1.
Many of the clean water and drinking projects were funded by state revolving fund loans supported by the federal act funding, said John Mousseau, chief investment officer and executive vice president at Cumberland Advisors. The federal government will provide sharply less aid for the SRF programs in the coming fiscal year. "Most states are now having to shift back to more of a baseline funding program. Clearly there will be constraints here."
The federal spending on SRFs is shifting to community grants, Mousseau said.
"Clearly this takes away some of the financial flexibility of the states in general and, because of the population increase, Florida particularly. More recently, Florida has targeted more of its revolving fund framework to disaster recovery and resiliency projects," he said.
"There is no question this puts more of a financial strain on municipalities in Florida and higher interest rates only add to the pain," Mousseau said. "Part of this is infrastructure playing catch-up to what was unbridled development. No question that the municipal bond market will play a role in financing a lot of needed water projects but this could result certainly in ratings being reviewed and possible downgrades along with higher borrowing costs in general because of the rise in interest rates."
Audra Dickinson, senior director at Fitch Ratings, said many of the factors impacting Florida water utilities are not unique to that state. Many states have more water utility demand for SRF loans than supply. The costs of pursuing capital programs have gone up faster than inflation over the last few years, she said.
The increase in interest rates over the last several years has made federal
Polk Regional Water Cooperative Executive Director Eric DeHaven said the cut in SRF availability is a new problem for the cooperative.
The cooperative serves 750,000-population Polk County in central Florida and its 15 municipal governments.
It asked for a $130 million SRF loan and received only $44 million. The PRWC was notified in June 2026 that the $86 million on the waiting list would not be forthcoming due to a reduction in funds from the Infrastructure Investment and Jobs Act General Supplemental Funding. The Florida Department of Environmental Protection has indicated the PRWC can expect approximately $10 million in new allocations for the project if it re-applies.
For water cooperatives, SRF loans offer the benefit of comparatively lower interest rates offset by the downside of fairly quick payback, DeHaven said. By comparison, WIFIA loans have higher rates but longer payback periods.
Todd Swingle, CEO and executive director of the Toho Water Authority, said SRF loans have generally been a secondary source of funding for the authority.
Ann Lee, finance and budget senior manager for Peace River Manasota Regional Water Supply Authority, said the authority isn't concerned about SRF availability.
Much of Florida has been
At least two of the five water management districts in Florida are encouraging residents and businesses to conserve water, Dickinson said.
Lee, Swingle and DeHaven said they weren't experiencing significant drought impacts and don't expect any even if drought conditions continue for several more months.
Dickinson said Florida water utilities generally have ample days cash on hand, in preparation for possible emergencies like hurricanes that occasionally hit the state.
Moody's Ratings Vice President of Public Finance Valentina Gomez said the utilities' ratings have been extremely stable.
Dickinson said some of the utilities that have to deal with wastewater were struggling financially to respond to Florida state government's drastic curb to the utilities' release of treated wastewater into the ocean and federally mandated PFAS removal regulations. Some Florida water utilities commingle wastewater finances with water finances.
The three utilities/cooperatives contacted for this story have significant capital improvement plans set for the next five years.
Swingle said Toho, formally the Tohopekaliga Water Authority, plans to spend $1.5 billion for water and wastewater projects in the next five years. The reasons for them include addressing water supply, compliance (e.g. PFAS, nutrient water quality), renewal and replacement of infrastructure, technology improvements and pipeline projects for capacity or because of needed relocations due to road projects.
Toho's financing will come from a number of sources, with bonds totaling $359 million expected to be sold in the next four fiscal years, Swingle said. It enjoys AAA ratings from Fitch and S&P Global Ratings.
Toho priced $218.3 million
Lee said Peace River Manasota's primary capital project over the next five years is the continued construction of the Surface Water System Expansion Project. This includes a 9 billion-gallon off-stream reservoir, an additional river intake, conveyance piping and a new 24-million-gallon-per-day water treatment facility. Bonds will be part of the financing. The first $370 million of bonds were sold in August 2025.
The project is to serve the growing population of parts of Southcentral and Southwest Florida.
DeHaven said Polk Regional is in the midst of constructing two major projects, both aimed at drawing water from the Lower Floridan aquifer.
Three central Florida water districts have joined to form the Central Florida Water Initiative to plan and regulate water use in the region. The Central Florida Water Initiative generally limits utilities to their demonstrated 2025 Upper Floridan Aquifer demand,
This has led many utilities to turn to other sources, including the Lower Floridan Aquifer, which is underneath the Upper Floridan Aquifer. It is more expensive to drill to this aquifer and the water is brackish and thus needs more water treatment. However, given demand increases, several utilities are turning to it as a source.
One of Polk's projects is 50% complete and is expected to be finished in 2028. In its first phase it should provide 7.5 million gallons a day.
A second project is in a final design phase and has some limited construction already completed. It will provide 2.5 million gallons per day when completed in 2032.
The projects together are expected to cost $800 million.
Over time the projects' production of water can be increased, DeHaven said.
DeHaven said at this point he didn't expect to use municipal bonds for the projects.
The American Water Works Association estimates there is $33.6 billion being spent each year on water capital projects in the United States, far less than what it says is the $90 billion needed.
In a recent report, Moody's said that there is a substantial lack of investment going on in public infrastructure in the United States, which is likely to worsen with the end of the Infrastructure Investment and Jobs Act.
Those local governments failing to invest enough in infrastructure, which are most exposed to climate change and which are most exposed to affordability pressures are the ones most likely to suffer negative credit pressure, Moody's said.
